Benchmarks took a battering on Wednesday after President Barack Obama stood firm on increasing tax rates for rich Americans and violence broke out in the Middle East. Moreover, investors’ apprehensions about the fiscal cliff pushed The Dow Jones to its lowest level since June. Meanwhile, U.S. retail sales fell in October following three months of gains. The industrial and the financial sectors were the major losers among the S&P 500 industry groups.
The Dow Jones Industrial Average (DJI) dropped 1.5% to close the day at 12,570.95. The Standard & Poor 500 (S&P 500) declined 1.4% to finish yesterday’s trading session at 1,355.49. The tech-laden Nasdaq Composite Index shed 1.3% to end at 2,846.81. The fear-gauge CBOE Volatility Index (VIX) surged 7.6% to settle at 17.92. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 7.4 billion shares, significantly higher than the daily average of 6.51 billion shares. Declining stocks easily outpaced the advancers on the NYSE; as for 88% stocks that fell, only 10% stocks moved higher.
The bearish sentiment in the markets over apprehensions surrounding the impending fiscal cliff pushed the benchmarks lower yesterday. The Dow fell as much as 200 points after President Barack Obama once again emphasized the need to raise tax rates for rich Americans. The blue-chip index has reached its lowest level since June 26 whereas the S&P 500 has dropped to a level last observed in late July. Markets were also affected by violence in the Middle East where Israel attacked Palestinian militants in Gaza and killed the leader of the Hamas militant organization.
Meanwhile, President Barack Obama met business executives at the White House to discuss the impending fiscal cliff. After meeting with Obama, business executives pleaded the President and Congress to avoid the fiscal cliff; otherwise it could lead to severe implications for consumer spending and business. After two back-to-back meetings with labor and civic leaders and now business executives, the President is scheduled to meet Republican House Speaker John Boehner and top Republican and Democratic leaders on Friday at the White House.
Alan Mulally, CEO of Ford Motor Company (NYSE:F), who was one among the twelve business executives who met President Obama has said: "Our country needs a bipartisan solution for the 'fiscal cliff' that promotes jobs and economic growth now, and avoids damage to a still fragile economy." President Obama said a modest increase in tax rate for wealthy Americans "will not break their backs" ant this will not affect the business investment climate.
Meanwhile, The U.S. Census Bureau released retail sales data which revealed that advance retail sales numbers fell 0.3% in October to $411.6 billion from the previous month but were up 3.8% from the year-ago period. The October figure was above consensus estimates of -0.2%. Non store retail sales surged 7.2% from the previous year. According to the commerce department, a decrease in retail sales indicated that Americans are still concerned about the economy’s problems.
Coming to corporate earnings, Cisco Systems, Inc. (NASDAQ:CSCO) surged 4.8% after the company reported first-quarter results which came above street estimates. Profits and revenue were both higher than analyst estimates. Better-than-expected results from Cisco pushed the markets into the green for a short period. Abercrombie & Fitch Co. (NYSE:ANF) also posted quarterly results which revealed that net income surged 40% in the third-quarter, above analysts’ estimates. Shares of the company jumped 34.5%.
The financial sector had a bad run and the Financial Select Sector SPDR tumbled 1.7%. Stocks such as Stocks such as JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc. (NYSE:C), Goldman Sachs Group, Inc. (NYSE:GS), Bank of America Corp (NYSE:BAC) and Wells Fargo & Company (NYSE:WFC) lost 1.9%, 3.2%, 1.9%, 3.6% and 1.8%, respectively.